South Korean Cryptocurrency Regulation: International Interference

South Korean Cryptocurrency Regulation: International Interference

By Amy Byrne, Staff Member

In November 2017, eighty percent of global bitcoin trading[1] was accounted for in South Korea, Japan, and Vietnam.[2] South Korea, known as the most active cryptocurrency exchange in the world,[3] is reportedly “obsessed” with bitcoin.[4]  An estimated one in fifty South Koreans are trading cryptocurrency.[5] Consequently, South Korea’s recent cryptocurrency laws are projected to significantly alter the international market.[6]

Effective January 30, 2018, South Korea will ban cryptocurrency trading from anonymous bank accounts.[7] This is an effort to combat market manipulation as, unlike most currencies, cryptocurrency operates outside government bank regulations.[8] North Korea’s cyber-attacks have also pushed the South Korean government to enact regulation.[9] On January 23, 2018, South Korean Financial Services Commission Vice Chair, Kim Yong-beom, reported that the government will establish a “real-name system” to monitor criminal activity for cryptocurrency transactions.[10] Although the government is leaning away from its prior proposal to ban all cryptocurrency transactions, opinions vary on how the regulations will alter the international market.[11]

Speculations, regarding South Korea’s new cryptocurrency regulation, include enthusiasm for government legitimacy and, alternatively, concerns for an increase in international criminal activity. Enthusiasts for cryptocurrency regulation believe it “will create legitimacy and transparency, reduce fraud, and ultimately improve the integrity of such markets.”[12] Critics suggest South Korea’s regulations will increase/relocate related cryptocurrency theft and ransom. [13] For example, following North Korea’s recent hack on South Korean cryptocurrency, critics argue that North Korean hackers will relocate and increase attacks on foreign nations, such as on the United States.[14] Ultimately, regardless of the outcome, South Korean regulations are projected to interfere with the cryptocurrency market.

[1] Bitcoin is a type of cryptocurrency.  See Chris Weller, Bitcoin is Going Wild – Here’s What the Cryptocurrency is All About, Bus. Insider. (May 25, 2017, 11:54 AM ET)

[2] Eun- Young Jeony and Steven Russolillo. The Force Behind Bitcoin’s Meteoric Rise: Millions of Asian Investors. Wall St. J. (Dec. 12, 2017)

[3] Carlos Gutierrez, Jr. Asia Takes the Lead in Regulating Cryptocurrency Markets, Asia Times (Jan. 10, 2017, 6:25 AM UTC)

[4] Sherisse Pham, North Korea Linked to New Cryptocurrency Attacks, CNN Tech. (Jan. 17, 2018) (stating that “North and South Koreans are OBSESSED with bitcoin.”)

[5] Yoochul Kim, Behind South Korea’s Cryptocurrency Boom, MIT Tech. R. (Dec. 7, 2017) (“South Korea is believed to have about one million registered daily traders in virtual currency, which is equivalent to about one out of every 50 citizens.”)

[6] See Lee Hana. Gov’t Issues Statement on Virtual Currency Exchanges, (Jan. 15, 2018). E.g. Cynthia Kim. South Korea to Ban Cryptocurrency Traders from using Anonymous Bank Accounts, Reuters Bus. News (Jan. 22, 2018, 8:08 PM) (Stating that Bitcoin experienced a loss following the regulatory announcement).

[7] Cynthia Kim. South Korea to Ban Cryptocurrency Traders from using Anonymous Bank Accounts, Reuters Bus. News (Jan. 22, 2018, 8:08 PM); South Korea to Ban Cryptocurrency Traders From Using Anonymous Bank Accounts, CNBC (Jan. 22, 2018, 9:12 PM ET)–south-korea-announces-real-name-account-rules.html.

[8] Pham supra note 4.

[9] Trump Administration Releases Rules on Disclosing Cyberflaws, 35 West J. Comp. & Internet 11 (2017) (“Another major concern is North Korea, which has become increasingly aggressive in cyberspace.”)

[10] South Korea Ends Anonymous Cryptocurrency Trading, CBS News (Jan. 23, 2018, 8:29 AM)

[11] Id. (“Suggestions by top government officials that a ban on such trading was under consideration prompted supporters of cryptocurrency investing to petition the presidential office’s website to block such a move.”)

[12] Gutierrez supra note 3.

[13] Aatif Sulleyman. North Korea is Stealing Bitcoin and the Threat to Cryptocurrency Investors is Growing, Experts Warn, Independent News (Jan. 23, 2018. 11:50 GMT)

[14] Id. See also Everlyn Cheng. Nearly $400 Million Lost, Stolen, from Sales of new Digital Coins, Ernst & Young says, CNBC (Jan. 22, 2018, 2018, 3:31 PM ET)